Five days after the July 4 drop below $60,000, the long-short indicator shows that the morale of professional Bitcoin (BTC) traders has fallen to its lowest level in two weeks. This suggests that whales and market makers are hesitant to open bullish leveraged positions even as the Bitcoin price has fallen to its lowest level in four months.
This lack of enthusiasm is concerning, especially since Bitcoin was trading near $72,000 on June 7, leading some analysts and traders to say that the current cycle may have already peaked.
Is a 25% Bitcoin price correction typical?
DCinvestor, a digital art collector and digital asset advocate, argued that a 25% Bitcoin price correction from its intra-cycle high is normal and does not signal the end of a bull market. While there have been similar price movements in the past, the failure to break above $72,000 since March 24 suggests a decline in buying interest. Additionally, other indicators, such as search trends for “buy bitcoin,” indicate a decline in retail interest over the past four months.
Traders are debating whether the recent correction could be due to the FUD that the German government is currently selling off over $3 billion worth of previously seized coins and the imminent distribution of assets from the bankrupt exchange Mt. Gox, which has been in bankruptcy for over a decade. Mt. Gox’s Bitcoin redemption is approaching $8 billion, but the timing is uncertain and creditors may choose to hold onto it rather than sell it on the market. Meanwhile, more than 50% of the 50,000 BTC in German government wallets have been transferred to exchanges by July 9.
The S&P 500 Index hitting a new all-time high on July 9 also contributes to the negative sentiment towards cryptocurrencies. Several large cap stocks, including NVidia, Taiwan Semiconductor, Eli Lilly, Broadcom, Applied Materials, Meta, Qualcomm, ASML, and Netflix, are up more than 40% since the start of 2024. This stark performance contrast makes Bitcoin, which is up only 30% so far in 2024, less attractive.
Moreover, gold is trading just 3% below its all-time high, suggesting that investors are currently focusing on its scarcity. As such, Bitcoin’s 20% decline since June 7th appears to be far removed from traditional financial markets and macroeconomic expectations. Additional evidence comes from bond markets, with the CME FedWatch tool indicating a 75% chance of a Fed rate cut by September, compared to a 50% chance just a month ago. Lower costs of capital make fixed income investments less attractive.
Top Bitcoin traders are no longer bullish, according to long-short indicators.
The notable decline in bullish leverage positions among Bitcoin pro traders reflects a lack of enthusiasm despite the generally favorable scenario for risky assets. Investors expect increased market liquidity as interest payments on federal government debt are expected to reach $1 trillion annually by 2024, forcing the Fed to lower interest rates regardless of economic trends. A high interest rate environment increases the cost of capital for individuals, companies, and banks, putting the solvency of the financial system at risk.
Related: 5 Bullish Claims That Bitcoin Price Has Bottomed at $53,000
According to the Long-Short indicator, which measures the overall positioning in the spot and futures markets, top traders on Binance and OK have reduced their bullish leverage positions to the lowest level in two weeks. The indicator favored longs (buys) at a ratio of 1.8x on July 2, but quickly dropped to 1.2x by July 6. In essence, the bulls have cut their losses and are skeptical about a short-term Bitcoin price surge.
It is still unclear what factors will cause Bitcoin to regain its bullish momentum, but it will likely involve restoring trader confidence. Whales and market makers may be overly cautious due to the ongoing FUD, but there are no signs of bearish betting on long-short indicators that would confirm that the Bitcoin cycle has peaked.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.